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M/S Gayathri Projects Ltd., Vs. The Deputy Commissioner Of - Court Judgment

LegalCrystal Citation
CourtKarnataka Dharwad High Court
Decided On
Case NumberWP 106815/2016
Judge
AppellantM/S Gayathri Projects Ltd.,
RespondentThe Deputy Commissioner Of
Excerpt:
:1. : in the high cour t of karna taka dharwad bench da ted th is the 2 1 s t d ay of oc tober, 2016 before r the hon’bl e mr.jus tice p .s.di nesh kumar wr it pet it ions no.106 815 -1068 17/20 16 (t -res) be tween : m/s. gaya thri proj ec ts l td., i-floor no .2, ward no.1 6 sri tejalakshmi devi compl ex raghavendra talki es road taluka ballari, dis tric t: ballari rep . by i ts accoun ts manager shri b . subbaraju s/o narayana raju age:44. years , res : ballari ... pe ti tion er (by sri narayan g . rasalkar, adv.,) and:1. 2. the depu ty commissioner of commercial taxes (audi t-1) vanijy e therige bhavan d.devaraj urs lay ou t a blocik, davanagere the sen ior manager bank of ba roda khairatabad b ranch61-84, sec re tari a t road khairatabad hyderabad – 500 004 ... responden ts (by.....
Judgment:

:

1. : IN THE HIGH COUR T OF KARNA TAKA DHARWAD BENCH Da ted th is the 2 1 s t d ay of Oc tober, 2016 BEFORE R THE HON’BL E MR.JUS TICE P .S.DI NESH KUMAR WR IT PET IT IONS No.106 815 -1068 17/20 16 (T -RES) BE TWEEN : M/s. GAYA THRI PROJ EC TS L TD., I-FLOOR No .2, WARD No.1 6 SRI TEJALAKSHMI DEVI COMPL EX RAGHAVENDRA TALKI ES ROAD TALUKA BALLARI, DIS TRIC T: BALLARI REP . BY I TS ACCOUN TS MANAGER SHRI B . SUBBARAJU S/O NARAYANA RAJU AGE:

44. YEARS , RES : BALLARI ... PE TI TION ER (BY SRI NARAYAN G . RASALKAR, ADV.,) AND:

1.

2. THE DEPU TY COMMISSIONER OF COMMERCIAL TAXES (AUDI T-1) VANIJY E THERIGE BHAVAN D.DEVARAJ URS LAY OU T A BLOCIK, DAVANAGERE THE SEN IOR MANAGER BANK OF BA RODA KHAIRATABAD B RANCH61-84, SEC RE TARI A T ROAD KHAIRATABAD HYDERABAD – 500 004 ... RESPONDEN TS (BY SRI M KUMAR, AGA., FOR R1) THESE WRI T P E TITI ONS ARE F IL ED UNDER AR TICLES226AND227OF THE CONS TI TU TION OF INDIA , PRAYING TO: A) DECLARE THAT THE IMPUGNED NOTICES ISSUED U/S.45 OF THE KARNA TAKA VALUE ADDED TAX AC T, 200 3, :

2. : TAX AC T, VALUE ADDED DATED:1 2.0 8.2 016 FO R RS.4 7,0 1,8 40/- OF THE DEPU TY COMMISSIONER OF COMMERC IAL TAXES (AUDIT1 , DAVANAGERE TOWARDS ARREARS OF TAX, PENAL TY AND IN TERES T PAYABLE FOR TH E P ERIODS OF200520 06 AND (II) THE IMPUGNED NO TIC E UNDER SEC TION45OF THE KARNATAKA2003, DATED:1 2.0 8.2 016 FOR RS.1 0,5 0,2 5,7 96/- B Y THE DEPU TY COMMISSIONER OF COMMERC IAL TAXES (AUDIT1 , DAVANAGERE BEING ARREARS OF TAX, PENAL TY AND IN TERES T PAYABLE FOR TH E P ERIODS OF200620 07 AND (III) THE IMPUGNED NO TICE ISSUED UNDER SEC TION9OF THE TAX ON THE EN TRY OF GOODS ACT, 1979 DATED:1 2.0 8.2 016 FOR RS.2 ,12 ,76 ,97 6/- B EING THE ARREARS OF TAX, P ENAL TY AND I N TERES T PAYABLE FOR THE YEAR2006-2007 AS IN TIMATED BY THE RESPONDEN T NO.2, THE BRANCH MANAGER, BANK OF BARODA, LE TTER KHAIRATABAD, DATED:1 6.0 8.2 016 ARE UNENFORCEABL E, NUL L AND VOID AND NOT B INDING ON RESPONDEN T NO.2 BEING B EYOND THE TERRI TORIAL JURISDIC TION P RESC RIB ED UNDER SUB S EC TION (2) OF SEC TION1OF THE KARNA TAKA VALUE ADDED TAX AC T, 2003 AND THE PROVISIONS OF THE KA RNA TAKA TAX OF EN TRY OF GOODS ACT, 1979 ; AND ANN EXURE-A HYDERABAD PER HIS AS IN B) VALUE ADDED QUASH THE IMPUGNED NO TIC ES ISSUED U/S .45 OF THE KARNA TAKA VALUE ADDED TAX AC T, 2 003 , DATED:1 2.0 8.2 016 FOR RS.4 7,0 1,8 40/- OF THE DEPU TY COMMISSIONER OF COMMERC IAL TAXES (AUDIT1 , DAVANAGERE TOWARDS ARREARS OF TAX, PENAL TY AND IN TERES T PAYABLE FOR TH E P ERIODS OF200520 06 AND (II) THE IMPUGNED NO TIC E UNDER SEC TION45OF THE KARNATAKA2003, DATED:1 2.0 8.2 016 FOR RS.1 0,5 0,2 5,7 96/- B Y THE DEPU TY COMMISSIONER OF COMMERC IAL TAXES (AUDIT1 , DAVANAGERE BEING ARREARS OF TAX, PENAL TY AND IN TERES T PAYABLE FOR TH E P ERIODS OF200620 07 AND (III) THE IMPUGNED NO TICE ISSUED UNDER SEC TION9OF THE TAX ON THE EN TRY OF GOODS ACT, 1979 DATED:1 2.0 8.2 016 FOR RS.2 ,12 ,76 ,97 6/- B EING THE ARREARS OF TAX, P ENAL TY AND I N TERES T PAYABLE FOR THE YEAR2006-2007 AS IN TIMATED BY THE RESPONDEN T NO.2, THE BRANCH MANAGER, BANK OF BARODA, KHAIRATABAD, LE TTER DATED:1 6.0 8.2 016 AS PER ANN EXURE-A AS NUL L AND VOID, E TC .,. HYDERABAD AC T, TAX HIS IN :

3. : THESE WRI T P E TITI ONS HAVING B EEN HEARD AND RESERVED FO R

ORDER

S, THIS DAY, P.S.D INESH KUM AR. J., PRONOUNCED THE FOLLOWING:- O R DE R Learned Addl. Government Advocate is directed to take notice for respondent No.1.

2. Petitioner, a public limited company involved in road construction activity is registered as a ‘dealer’ under the Karnataka Value Added Tax Act 2003 (KVAT Act for short) and Karnataka Tax on Entry of Goods Act 1979 (KTEG Act for short). By a communication dated 16.08.2016, its banker (2 n d respondent), conveyed that petitioner’s bank account was brought under lien in compliance with three notices dated 12.08.2016 issued by the 1 s t respondent, Deputy Commissioner of Commercial Taxes, Davangere. Feeling aggrieved, petitioner has come up with these writ petitions challenging the said notices and the lien marked over its bank account.

3. Relevant facts leading to issuance of notices are, 1 s t respondent passed an ex par te reassessment order dated 25.4.2013 under the provisions of KVAT :

4. : Act for the assessment year 2005-06. The same was initially challenged before the Joint Commissioner of Commercial Taxes who allowed it in part. On further appeal, the Karnataka Appellate Tribunal (KAT for short) in STAs No.3307-3318/2013 allowed them in full and remanded the matter for fresh consideration.

4. First respondent passed two other ex par te re assessment orders; an order dated 7.4.2014, under the KVAT Act for the year 2006-07 which was challenged in W.P.No.107587/2014 before this Court and another dated 5.4.2014 under the KTEG Act for the year 2006-07 challenged in W.P.No.104387/2016.

5. While the matters stood thus, petitioner received the impugned communication dated 16.8.2016 from its banker.

6. Assailing the legality and correctness of the notices issued under Section 45 of the KVAT Act and Section 9 of KTEG Act, Sri N.G.Rasalkar, learned Counsel for the petitioner made following submissions: :

5. : a) That notice for the assessment year 2005-06 under the KVAT Act is bad in law as there exists no tax liability pursuant to order of remand passed by the KAT; b) That notice for the year 2006-07 under the KVAT Act is not sustainable in law as the said issue is pending consideration in W.P.No.107587/2014; c) That notice for the year 2006-07 under KTEG Act is also not sustainable in law as the said issue is subject matter of W.P.No.104387/2016; d) As per Sub-Section (2) of Section 1, both KVAT Act & KTEG Act are applicable and enforceable only within the ‘territorial jurisdiction’ of State of Karnataka. Petitioner maintains its account with Khairtabad (Hyderabad) branch of Bank of Baroda, which is beyond the territorial limits of State of Karnataka. Hence the 1 s t respondent could not have exercised his authority and issued any notice to its banker; :

6. : e) As the impugned notices have been issued without authority of law, 2 n d respondent ought not to have complied with the directions contained therein; f) The 1 s t respondent could not have initiated recovery proceedings whilst the interim prayer made in Writ Petition No.107587/2014 challenging the validity of the amendment to the KVAT Act is pending consideration before this Court. In support of this contention he placed reliance on a judgment of this Court in the case of M/s M.L.N ar asimha Gupta vs. Commercial T ax Off icer, 1 s t Circle, repor ted in 1989 (2) Kar.L.J.

353. 7. Amplifying above contentions, elaborate arguments were addressed. However, the petitioner has pressed two principal contentions. Firstly, that the 1 s t respondent has no ‘territorial jurisdiction’ and secondly, that in view of judgment of this Court in M.L.N ar asimha Gup ta’ s case, recovery proceedings could not have been initiated. :

7. :

8. Per contra, learned AGA appearing for the first respondent submitted that: a) admittedly arrears of tax and penalty due as on date is more than Rupees 10 Crores ( Ten Crores); b) Sub-Section (2) of Section 1 of KVAT Act should be read along with statement of objects of the KVAT Act. A harmonious reading of both would show that the aspect of territorial jurisdiction is limited for the purpose of ‘charging’ and not recovery; c) The respondent-State is vested with power under Section 45 of the KVAT Act to demand and recover any tax, penalty or interest from ‘any person’ holding money or property on behalf of an assessee. Thus, every person holding money on behalf of an assessee shall become liable to pay arrears of tax under the KVAT Act; d) The judgment of this Court in the case of M/s.M.L.N ar asimha Gupta supra is not applicable to this case because, firstly, in the facts and circumstances of that case this Court had directed the :

8. : Appellate Authority to consider the interim application. Secondly, petitioner has challenged the ‘vires’ of the amendment to the Act and re-assessment orders in a writ petition and the same is not a statutory appeal; e) Petitioner has not exhausted the alternative and efficacious remedy of statutory appeal under Section 62 of the KVAT Act.

9. Incontrovertible facts of this case fall within a narrow compass. The first principal contention urged on behalf of the petitioner is with regard to territorial jurisdiction. First respondent is the designated recovery officer. Hence there is no dispute with regard to his authority to initiate recovery proceedings. Then the following points fall for consideration of this Court.

1. Whether 1 s t respondent could issue recovery notices to the branch manager of petitioner’s bank situated beyond the State of Karnataka under the provisions of KVAT Act & KTEG Act?.

2. Whether 1 s t respondent could have issued notices whilst writ petitions filed :

9. : by the petitioner and I.A.s for stay are pending consideration?.

10. R e : P o in t N o :

1. The subtle issue involved in this point is exercise of power and authority by a Tax Recovery Officer while issuing a notice emanating from his office situated within the State of Karnataka and its fructification at a geographical location beyond the State of Karnataka.

11. Law enacted by the Parliament or State Legislature empowers the Executive to exercise powers flowing from and under a statute. Analysis of facts in this case shows that the Tax Recovery Officer has exercised his power flowing from the KVAT and KTEG Acts and issued notices to the petitioner’s banker; whereas, the grievance of the petitioner is that the branch of its banker is situated beyond the State of Karnataka and therefore, the first respondent could not invoke his jurisdiction under the said Acts beyond State’s Territory. Admittedly petitioner has registered himself as a dealer under both KVAT and KTEG Act. He has subjected himself to the jurisdiction of the :

10. : assessing and recovery authorities exercising powers under the said Acts.

12. Recovery of tax, penalty or any other amount from ‘certain other persons’ is provided under Section 45 of the KVAT Act. The par i mater ia provision in KTEG Act is Section 9.

13. Relevant portion of Section 45 of KVAT Act reads as follows:

4. 5 . R e c o v e r y o f t a x , p e n a l t y , o r a n y o t h e r a m o u n t , f r o m c e r t a i n o t h e r p e r s o n s .-. (1 ) T h e p r e s c r i b e d a u t h o r i t y m a y a t a n y t i m e o r f r o m t i m e t o t i m e , b y n o t i c e i n w r i t i n g , a c o p y o f w h i c h s h a l l b e f o r w a r d e d t o t h e d e a l e r a t h i s l a s t a d d r e s s k n o w n t o t h e p r e s c r i b e d a u t h o r i t y , r e q u i r e a n y p e r s o n f r o m w h o m m o n e y i s d u e o r m a y b e c o m e d u e t o t h e d e a l e r o r a n y p e r s o n w h o h o l d s o r m a y s u b s e q u e n t l y h o l d m o n e y f o r o r o n a c c o u n t o f t h e d e a l e r t o p a y t o t h e p r e s c r i b e d a u t h o r i t y , e i t h e r f o r t h w i t h u p o n t h e m o n e y b e c o m i n g d u e o r b e i n g h e l d a t o r w i t h i n t h e t i m e s p e c i f i e d i n t h e n o t i c e , n o t b e i n g b e f o r e t h e m o n e y b e c o m e s d u e o r i s h e l d , s o m u c h o f t h e m o n e y a s i s s u f f i c i e n t t o p a y t h e a m o u n t d u e b y t h e d e a l e r i n r e s p e c t o f a r r e a r s o f t a x o r p e n a l t y o r t h e w h o l e o f t h e m o n e y w h e n i t i s e q u a l t o o r l e s s t h a n t h a t a m o u n t .

14. Relevant portion of Section 9 of KTEG Act reads as follows:

9. . R e c o v e r y o f t a x f r o m c e r t a i n o t h e r p e r s o n s .-. (1 ) T h e a s s e s s i n g a u t h o r i t y m a y , a t a n y t i m e o r f r o m t i m e t o t i m e , b y n o t i c e i n w r i t i n g (a c o p y o f w h i c h s h a l l b e f o r w a r d e d t o t h e 1 [ x x x]. 1 d e a l e r f r o m w h o m a n y t a x a s s e s s e d i s d u e a t h i s l a s t a d d r e s s k n o w n t o t h e s s e s s i n g a u t h o r i t y ) r e q u i r e a n y p e r s o n f r o m w h o m m o n e y i s d u e t o t h e 1 [ x x x]. 1 d e a l e r o r a n y p e r s o n w h o h o l d s o r m a y s u b s e q u e n t l y h o l d m o n e y f o r o r o n a c c o u n t o f t h e 1 [ x x x]. 1 d e a l e r t o p a y t o t h e a s s e s s i n g a u t h o r i t y e i t h e r f o r t h w i t h u p o n t h e m o n e y b e c o m i n g d u e o r b e i n g h e l d a t o r :

11. : w i t h i n t h e t i m e s p e c i f i e d i n t h e n o t i c e (n o t b e i n g b e f o r e t h e m o n e y b e c o m e s d u e o r i s h e l d ) s o m u c h o f t h e m o n e y a s i s s u f f i c i e n t t o p a y t h e a m o u n t d u e b y t h e 1 [ x x x]. 1 d e a l e r i n [ 1 9 7 9 : K A R . A C T27 T a x o n E n t r y o f G o o d s 7 5 5 r e s p e c t o f a r r e a r s o f t a x o r p e n a l t y o r t h e w h o l e o f t h e m o n e y w h e n i t i s e q u a l t o o r l e s s t h a n t h a t a m o u n t .

15. A careful reading of the above provisions clearly indicates that a Tax Recovery Authority may issue a notice to ‘ any person’ who holds or may subsequently hold money for or on behalf of the dealer. In the instant case, according to the petitioner, 1 s t respondent authority has called upon its banker to pay the arrears of tax and penalty from petitioner’s account.

16. It may be profitable to note that the issue with regard to proceeding against ‘any person’ fell for consideration before the Hon’ble Supreme Court in the case of SEB I v. Pan Asia Advisors L td., (2015) 14 SCC71wherein, the Apex Court was examining the principles of ‘effects doc tr ine’ in cases involving exercise of extra territorial jurisdiction and held that to protect the interests of investors, ‘eff ec ts doc tr ine’ :

12. : could be applied. Two relevant passages from the said judgment read as follows:- 1 0 6 . A r e a d i n g o f t h e a b o v e j u d g m e n t m a k e s i t c l e a r t h a t a l a w e n a c t e d b y P a r l i a m e n t i f s h o w s t h a t f o r p r o c e e d i n g a g a i n s t i n e x e r c i s e o f a n y e x t r a - t e r r i t o r i a l a s p e c t , w h i c h h a s g o t a c a u s e a n d s o m e t h i n g i n I n d i a o r r e l a t e d t o I n d i a a n d I n d i a n s i n t e r m s o f i m p a c t , e f f e c t o r c o n s e q u e n c e w o u l d b e a m i x e d m a t t e r o f f a c t s a n d o f l a w , t h e n t h e c o u r t s h a v e t o e n f o r c e s u c h a r e q u i r e m e n t i n t h e o p e r a t i o n o f l a w a s a m a t t e r o f l a w i t s e l f . T h e C o n s t i t u t i o n B e n c h , h o w e v e r , h e l d t h a t P a r l i a m e n t h a s n o p o w e r t o l e g i s l a t e f o r a n y t e r r i t o r y o t h e r t h a n t h e t e r r i t o r y o f I n d i a o r o t h e r p a r t o f I n d i a w i t h r e s p e c t t o a s p e c t s o r c a u s e s w h i c h h a v e n o i m p a c t o r n e x u s w i t h I n d i a a s w a s e x p l a i n e d i n Q u e s t i o n 1 . K e e p i n g t h e s a i d p r i n c i p l e t h u s p r o n o u n c e d b y t h i s C o u r t i n m i n d , w h e n w e e x a m i n e t h e S E B I A c t , 1 9 9 2 r e a d a l o n g w i t h t h e S C R A c t , 1 9 5 6 a s w e l l a s t h e 1 9 9 3 S c h e m e , w e f i n d t h a t t h e A c t i t s e l f p r o v i d e s f o r p r o c e e d i n g a g a i n s t a n y p e r s o n i n o r d e r t o p r o t e c t t h e i n t e r e s t s o f i n v e s t o r s a n d t h e s t o c k m a r k e t i n I n d i a w i t h r e f e r e n c e t o a n y f r a u d p l a y e d a g a i n s t s u c h i n t e r e s t o f t h e i n v e s t o r s i n I n d i a . T h e r e f o r e , t h e a n s w e r t o t h e f i r s t q u e s t i o n a s p r o n o u n c e d b y t h e C o n s t i t u t i o n B e n c h a p p l i e s i n a l l f o r c e t o t h e c a s e o n h a n d . t h i s j u d g m e n t i n p a r a 8 1 o f 1 1 3 . T h e r e f o r e , w h e n w e a p p l y t h e a b o v e p r i n c i p l e s s e t d o w n i n t h e s a i d j u d g m e n t t o t h e c a s e o n h a n d , w e a r e c o n v i n c e d t h a t t h e p r i n c i p l e o f “ e f f e c t s d o c t r i n e ” w i l l a p p l y t o t h e c a s e o n h a n d s i n c e w e h a v e f o u n d t h a t i n t h e e v e n t o f t h e a l l e g a t i o n s n o t e d t h e r e s p o n d e n t s b y t h e a p p e l l a n t b e i n g e s t a b l i s h e d , i t w i l l h a v e a f a r - r e a c h i n g c o n s e q u e n c e o n t h e I n d i a n i n v e s t o r s o n s e c u r i t i e s a s w e l l a s t h e s t o c k m a r k e t a n d c o n s e q u e n t l y t h e d u t y o f S E B I t o p r o t e c t t h e i r i n t e r e s t s w o u l d a u t o m a t i c a l l y c o m e i n t o p l a y a s s t i p u l a t e d u n d e r S e c t i o n s 1 1 - B , 1 1 - C , 1 2 a n d 1 2 - A o f t h e S E B I A c t , 1 9 9 2 . T h e r e f o r e , t h e s a i d j u d g m e n t w h e n a p p l i e d c a r e f u l l y w e f i n d t h a t t h e s a m e s u p p o r t s t h e c a s e o f t h e a p p e l l a n t r a t h e r t h a n t h e r e s p o n d e n t s . ( e m p has i s s up p l ie d ) l e v e l l e d a g a i n s t 17. Both KVAT Act and KTEG Act authorize recovery of tax by making a demand from ‘any person’. So long as an assessment or reassessment order is in force, it should be lawful for a Tax Recovery Authority to recover the assessed tax liability due to the State. :

13. : Admittedly, in the instant case, pursuant to reassessment orders there exists tax liability due and payable by the assessee-petitioner herein. Th erefore, a combined reading of the relevant provisions of Acts and the judgment of Hon’ble Supreme Court in SEB I case, leads to an irresistible inference that a Tax Recovery Officer could exercise his power to issue a notice emanating from his office to ‘any person’ holding money on behalf of an assessee.

18. Rule 59 of KVAT Rules 2005 prescribes mode of recovery which includes attachment and sale of both movable and immovable property. It is no more res integr a that a deposit in bank account is ‘property’. [see S tate of Mahar ash tr a Vs. T apas Neogy (1999) 7 SCC685.

19. The KVAT Act has come into force with its publication in the Gazette on 23.12.2004. By then the Information Technology Act 2000 (Act 21/2000 w.e.f 09.06.2000) was in full force. It was enacted by the Parliament to give effect to the resolution of 30 t h January 1997 passed by the General Assembly of the :

14. : United Nations adopting Model Law on Electronic Commerce adopted by the United Nations Commission on International Trade Law. The preamble to the said Act reads thus: “ P r e a m b l e : An Act to provide legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communication, commonly referred to as "electronic commerce", which involve the use of alternative to paper-based methods of communication and storage of information to facilitate electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the India Evidence Act, 1872, the Banker’s Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters connected therewith or incidental thereto; WHEREAS the General Assembly of the United Nations by resolution A/RES/ 51/162, date 30th January 1997 has adopted the Model Law on Electronic Commerce adopted by the United Nations Commission on International Trade Law; AND WHREAS the said resolution recommends, inter alia, that all States give favorable consideration to the said Model Law when they enact or revise their laws, in view of the need for uniformity of the law applicable to alternatives to paper based methods of communication and storage of information; AND WHEREAS it is considered necessary to give effect to the said resolution and to promote efficient delivery of Government services by means of reliable electronic records; BE it enacted by Parliament in the Fifty-first Year of the Republic of India as follows:” 20. Keeping in pace with the development all over the globe, India has adapted itself to the technology in vogue. In furtherance, Parliament has enacted the Information Technology Act, 2000. Banks in the country are ‘net enabled’ and offer net banking :

15. : and other products. To effect proper transfer of funds through NEFT, RTGS etc., Parliament has enacted ‘The Payment And Settlement Act, 2007’. Corresponding amendments have been made in the cognate Acts such as Indian Evidence Act, Bankers’ Books Evidence Act in consonance with the Information Technology Act, 2000. Courts cannot remain oblivious to the progress and development in the country, commercial practices in vogue and their corresponding sequel on the citizens’ rights as also the interest of State. The Hon’ble Supreme Court in the case of S IL IMPORT USA vs. EX IM Aids Silk Expor ters, B angalore, repor ted in (1999) 4 SCC567has held that the Parliament would be aware of modern devices and equipments. It has precisely stated thus:

15. Facsimile (or fax) is a way of sending handwritten or printed or typed material as well as pictures by wire or radio. In the West such mode of transmission came to wide use even way back in the late 1930s. By 1954 the International News Service began to use facsimile quite extensively. Technological advancement like facsimile, internet, e-mail etc. were in swift progress even before the Bill for the Amendment Act was discussed by Parliament. So when Parliament contemplated notice in writing to be given we cannot overlook the fact that Parliament was aware of modern devices and equipment already in vogue.

16. Francis Bennion in Statutory Interpretation has stressed the need to interpret a statute by making “allowances for any relevant changes that have occurred, since the Act's passing, in law, social conditions, technology, the meaning of words, and other matters”. :

16. :

17. For the need to update legislations, the courts have the duty to use interpretative process to the fullest extent permissible by the enactment. The following passage at p. 167 of the above book has been quoted with approval by a three-Judge Bench of this Court in State v. S.J.

Choudhary [(1996) 2 SCC428:

1996. SCC (Cri) 336]. : “It is presumed that Parliament intends the court to apply to an ongoing Act a construction that continuously updates its wording to allow for changes since the Act was initially framed (an updating construction). While it remains law, it is to be treated as always speaking. This means that in its application on any date, the language of the Act, though necessarily embedded in its own time, is nevertheless to be construed in accordance with the need to treat it as current law.” (emphasis supplied) 21. Under the provisions of KVAT Act or KTEG any person can register online as a dealer. He can also submit his returns ‘online’ and pay taxes by e-payment. Thus a dealer enjoys benefits of e- governance and accorded with facility and privilege to comply with statutory compliances by electronic mode which can be handled from any part of the globe without being physically present at the official address registered with the authorities.

22. Rule 79 of KVAT Rules prescribes mode of recovery by attachment and sale of shares in a Corporation. Rule 98 provides for the mode of recovery in which a share in a Corporation can be sold by a Tax Recovery Officer. Under the Companies :

17. : Act, shares of listed Companies are compulsorily held in the Demat (dematerialized) form. Seizure and sale of shares in ‘Demat’ form can be effected only in cyberspace by using internet. In contrast to real world, Cyberspace is made of virtual elements accessible through internet at any time and from any place without barrier of borders. Therefore, it is logical to infer and hold that once the Act has authorized attachment and sale of shares in a company, legislature had taken into account transaction by electronic mode. Second respondent, Bank of Baroda is State owned. This Court can take judicial note of its significant presence in the State of Karnataka. It offers contemporary banking facilities such as NEFT, RTGS, ATM etc. These services are available with computerized branches. Admittedly, petitioner’s bank account number consists of 14 digits (0950400000015) which indicates that it is ‘net enabled’. Thus, it can be safely concluded that money in petitioner’s bank account is available for transaction in every branch and ATM centre across the country and beyond the territory of India. :

18. : Further, Bank of Baroda is a ‘State’ under Article 12 of the Constitution of India. It offers National Electronic Fund Transfer (NEFT) and other contemporary banking facilities.

23. Validation of online registration, e-filing and e-payment are in consonance with the I.T.Act, 2000. So also the validation of net banking.

24. Attachment of a ‘net enabled’ bank account stands precisely on the same footing as that of attachment and sale of shares in a Company.

25. To paraphrase above discussion, both KVAT KTEG Acts authorize recovery officers to demand money from ‘any person’ and authorize recovery by attachment and sale of share in Companies. Hence, by natural corollary a Tax Recovery Authority can lay its hands on the money in deposit in a bank account situated beyond its territory if the same is accessible online. Therefore applying ‘ef fects doctrine’, the recovery proceedings initiated by the first respondent :

19. : under the provisions of the KVAT Act and KTEG Act are preeminently tenable.

26. Re : P o i nt N o . 2 . A careful perusal of the authority relied upon by the petitioner (M.L.Nar ashimha Gupta supra) shows that there is a classic difference between the two cases. In the said case, this Court was concerned with an I.A. for stay to be considered by an Appellate Authority in a statutory appeal. In contrast, the case on hand is a writ petition wherein, the petitioner has challenged the ‘vires’ of the Act and incidentally challenged the tax liability. Therefore, the immunity from recovery argued by the learned counsel for the petitioner is misconceived.

27. Resultantly, in view of above discussion, these writ petitions fail and are accordingly dismissed. No costs. :

20. :

28. Learned Addl. Government Advocate is permitted to file memo of appearance in four weeks. cp* Sd/- JUDGE


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